![]() The home goods retailer already holds $1.9 billion in long-term debt, up from $1.2 billion a year ago. And with only $154 million of cash left in the bank, management has virtually no good options left.įirst, consider the debt market. The company still burned through $1.05 billion in the past 12 months despite reducing $223 million in working capital. (The firm now has so many interim managers that half of its management team page lacks headshots).īut even the best efforts by management might not suffice. And BBBY has wasted no time in slimming down both its rank-and-file staff and C-suite officers. That would allow the retailer to shift inventory from closing stores to remaining ones, buying it more time to work out debt obligations. In Q3, CEO Sue Gove reiterated that the firm is on track to close 150 stores in fiscal 2022. In other words, once a retailer destroys trust with its vendors, rebuilding inventory takes a lot of cold, hard cash.īed Bath & Beyond’s management seems keenly aware of the credit risk. And discount retailer Tuesday Morning (NASDAQ: TUEM) only emerged from bankruptcy after securing a $ 110 million lending facility backed by three major investment banks. In 2018, Toys R Us folded after a bankruptcy warning caused suppliers to cull previously negotiated credit lines. This isn’t the first time a retailer has entered a death spiral. A Bed Bath & Beyond store in Burlington Massachusetts, Jan. Picture of empty store shelves in a Bed Bath Beyond store on Jan 11 2023 Others reduced credit limits to the retailer just as the busy holiday shopping season was kicking off. In November, suppliers to Bed Bath & Beyond began withholding shipments, worried that a potential bankruptcy could snarl payments. When things go wrong, however, the feedback loop quickly runs in reverse. That frees up cash to build new stores, creating more negative working capital to build even more stores, and so on. ![]() Companies like Walmart (NYSE: WMT) can have negative working capital - a case where goods are sold to end customers before suppliers are paid. In good times, this creates a virtuous cycle. Some retailers like Amazon (NASDAQ: AMZN) take the concept one step further and don’t pay suppliers until the inventory is sold. For every 30 days a firm like Bed Bath & Beyond can draw out payments, its return on capital invested increases by around 12%. Retailers have long boosted returns by paying suppliers late. Bed Bath & Beyond: Beware the Retail ‘Death Spiral’ 10, the firm announced results that missed expectations by a mile, sending its business into the closing acts of a retail “death spiral.” And although Redditors are valiantly pushing prices higher, they’ll have to send shares into the $25 range before BBBY stock has any chance of salvation. InvestorPlace - Stock Market News, Stock Advice & Trading Tipsīut away from the Wall Street trading floors and social media hype, Bed Bath & Beyond’s underlying business is looking increasingly fragile. … Right before Reddit investors sent shares up 200%. ![]() “A hoard of Reddit investors could easily send shares up 200% or more,” I wrote. In June, my quantitative Profit & Protection system flagged Bed Bath & Beyond as a cheaply priced turnaround play. It’s not the first time the home goods retailer has rewarded meme investors. Gleeful Reddit-based investors have since pushed shares up another 120%. High short interest - and a rock-bottom price - had created the perfect conditions for a short squeeze. ![]() On Monday, shares of Bed Bath & Beyond (NASDAQ: BBBY) suddenly jumped 22% on massive retail buying.
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